While current political debate is focused on whether the company tax rate should be cut, a poll of SME owners has revealed other tax areas are causing much greater headaches.
In a straw poll conducted on the My Business website between mid-February and mid-March, business leaders were asked the question: “Which tax do you find the most cumbersome to deal with in business?”
Of the six options put forward, company tax came in second to last, with just 7.2 per cent of 239 respondents admitting this is their biggest concern.
Instead, GST ranked as the most problematic tax with 28.8 per cent of the vote, followed very closely by fringe benefits tax (FBT) with 28.0 per cent. Payroll tax came in third place at 24.6 per cent. Combined, these three taxes are the biggest problem for more than four in every five business leaders.
Rounding out the list were capital gains tax (CGT) on 7.6 per cent, company tax on 7.2 per cent and PAYG on 3.8 per cent.
In its pre-budget submission, the Institute for Public Accountants (IPA) urged the government to release a white paper on tax reform, including the much-maligned GST.
“Even though the current political environment has made ‘big bang’ tax reform extremely difficult for the major political parties, there should be a long-term view and genuine public debate on tax reform. One of the main considerations is a rebalancing of the tax mix,” the institute said.
The IPA is pushing for an increase in the rate and coverage of the GST, meaning other taxes could be scrapped altogether.
“Consumption taxes such as the GST represent one of the most efficient and sustainable tax bases available. Australia’s GST base is relatively narrow and covers less than 50 per cent of private consumption,” it said.
“In addition, the GST rate [of 10 per cent] is relatively low compared to the OECD average of 18 per cent.
“An increase in the base and rate of the GST will be less burdensome on economic growth and can fund the abolition of various inefficient taxes as well as the reduction of personal and corporate income tax.”
It concluded by noting that much of the work on tax reform had already been completed by the Henry Tax Review, but that recommendations made back in 1975 by the Asprey Taxation Review were never implemented.
“Our tax mix is heavily weighted towards direct taxes on personal and corporate income. In fact this was identified some 40 years ago in the Asprey Taxation Review committee report back in 1975 which recommended that the weight of taxation should be shifted towards the taxation of goods and services and away from the taxation of income,” the IPA said.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.